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Adarsh Credit Co-op Reaches India's Rural Poor With Mobile Tech

Mobile phones are a key way to expand financial inclusion to rural areas across emerging markets, as M-Pesa has demonstrated in Kenya. In India, Adarsh Credit Co-operative Society reaches one million members through 800 branches and more than 100,000 financial advisors who travel through villages taking deposits or disbursing money by linking to the bank through their mobile phones.

“The advisors are like walking ATMs where customers can deposit cash or get cash,” said PhilipsPhilips Eapen, an SAPSAP business manager in Mumbai. “They do online and electronic banking and work primarily in rural areas, among the lowest strata of the population who don’t have access to financial institutions.” The amounts customers lend or deposit can be as low as $10 to $50 in a month, or $100 in a year.

It’s been more than a decade since the late C.K. Prahalad alerted the business world to the opportunity in thinking about the world’s poor as a viable market rather than simply a target for charitable NGOs. In financial services, he looked at how ICICI BankICICI Bank, one of India’s largest, and an Adarsh banking partner, was reaching out to poor people, particularly in southern India, where he was from. His book, “The Fortune at the Bottom of the Pyramid,” encouraged multi-national corporations to improve lives and make money by marketing to the poor who were so often neglected in corporate planning.

Prahalad would no doubt recognize similar thinking at Adarsh, which started in 1999 and has become the country’s largest credit cooperative society. It builds on the fact that 90 percent of Indians have a mobile phone but less than 50 percent have a banking account, said Himanshu Shah, the chief technology officer at Adarsh.

Deposit accounts range from three months to 60 months, and they pay interest rates from 9 to 13 percent percent annually. In turn, the Society makes small loans for business and microfinance. The Society says it can pay higher interest rates than commercial banks in part because it does not have to maintain reserves the way commercial banks are required to. Customers in a long-term account double their savings in 5.5 years.

“We believe in financial inclusion and we never delay any payment to the customer at the end of their tenure,” said Rahul Modi, managing director of Adarsh. “That instills great confidence in the institution and it becomes more transparent. That has resulted in good will and a good reputation across all loan areas.”

The Society’s Web site states: “Our loans are fully secured and our recovery is 100 percent. We have no non-performing assets on our books.”

In his review of micro-finance and ICICI Bank, Prahalad concluded that most micro finance organizations had to rely on support from nonprofits to survive because they began their operation by providing credit, rather than building on a deposit base and only later offering loans to their depositors.

Adarsh’s core retail strategy is accepting deposits from its customers, including through a deposit scheme where a customer has to make a deposit on a daily basis. Only after a member has established a deposit history is he or she able to borrow. The Society offers traditional loans and loans against deposits where members can borrow 60 percent of what they have in their account.

The Society’s financial advisors make the rounds of their customers daily to collect deposits, showing them the amount deposited on a mobile phone as they accept the funds. Customers like the fact they can see the deposit as it is made, and the advisors find that the mobile solution allows them to spend more time with customers. The customer accounts are updated in real-time when a deposit is made and the customer can receive an SMS message with her latest account totals. Customers are able to do self-service through phones, but the Society still wants to add more advisors, aiming for 200,000 by 2015 to reach out to more people.

“That is our business model,” Modi explained, “reaching out to people with advisors.” Customers can walk into a branch, if one is close, but the advisors are the core of the business. They act on behalf of the bank and earn a commission. To collect daily deposits, an advisor may visit 250 people in a day, usually working through a location like a vegetable market where he may see 50 to 100 customers in one spot.

The Society uses SAP’s Consumer Insights 365 platform which doesn’t require users to have smartphones. The platform is quite popular in developing economies because of its economical application development environment, said Eapen.

Mobile technology enables Adarsh to reach a population which the banks mostly don’t.

“The banks haven’t catered to this segment,” said Modi, “and we have personal relationships with our customers.” He thinks the personal relationships give the Society a strong competitive position which will make it difficult for retail banks to take away customers.

“There’s no reason for any customer to move from us to other banks. We have tapped these markets and are ahead of what others offer.” The Society is now looking to provide internet banking and reaching out to urban customers as well.

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